Would you notice if the 9/10 disappeared from gas prices?

Q: This falls in the category of what we have to do to “get there.” In other words, buy gas. Why has the archaic custom of pricing gas with 9/10 at the end of the price continued?

It hardly matters in this day and age that the price is whatever and then 9/10. Perhaps once upon a time, when gas was 25 cents a gallon or 30 cents a gallon like when I first got married, then the difference of 9/10 making it look cheaper made some sense. But at $4.00 a gallon who cares?

Why don’t the gas companies just end this foolishness. It would make their bookkeeping a lot simpler, I would think.

— Judy Hagemann, Brunswick

A: Jeff Lenard, spokesman for the National Association of Convenience Stores, said the fraction has been around far longer than gas stations — and that nine-tenths adds up for station owners.

The mill pricing, as it’s called, dates back to the First Constitutional Congress in the 1780’s. Back then, of course, there was such a thing as a half-cent (and no such thing as a gas station). The mill pricing has been in place for gas prices since the 1930’s, Lenard said.

The federal tax on a gallon of gas, he noted, is 18.4 cents.

“It probably started as soon as the government started taxing about a penny and a half a gallon in a federal excise tax in the mid-30s,” he said.

Prices back then were only 7 or 8 cents a gallon, which meant a 1.5 cent tax was a hefty fee, Back then, gas sellers would use different fractions: You’d see gas sold with a .5 or .7 at the end.

He noted gas stations aren’t the only ones who use the fraction.

“It just sounds less, the same reason that it’s used in infomercials: four easy payments of $39.99 etc.,” he said.

Such fraction pricing is not limited to gas sellers, he said, and it is not an attempt to fool buyers. But he said stores that sell fuel are not making much of a profit margin, and that fraction adds up.

“For retailers, it’s not really about any type of deception,” he said. “That .9 is about what they make per gallon. That .9 is very important to the retailer.”

The price at the pump is generally marked up about 15 cents, Lenard said. About half of that is paid out in fees to credit and debit card companies. Add in the costs of operation, he said, and the margin for store owners is slim.
The United States is not alone in pricing items with fractions. In Canada, he noted, you can see signs with .2, .5 or .7 on them.

In 2006, the owner of Jim’s Texaco in Palo Alto, California did away with the fraction. None of his customers noticed. According to a story in The Mercury News, a reporter spent more than two hours asking people if they noticed anything different about the price, and not one did.